Meta set to report earnings: Update on revamped AI strategy is key to fourth quarter

Meta is poised to reveal its fourth-quarter earnings on Wednesday, with investors keenly anticipating insights into the impact of its restructured artificial intelligence strategy. Analysts surveyed by LSEG are particularly interested in whether the company’s recent initiatives will yield positive results by 2026. In 2025, Meta allocated significant resources to revamp its AI division, including a staggering $14.3 billion investment in Scale AI to recruit its founder, Alexandr Wang, and other key personnel. Wang now heads Meta's advanced TBD unit, which is focused on crafting cutting-edge AI models. This reorganization followed the lukewarm reception of the Llama 4 model among developers last spring. Currently, Meta is experimenting with a new frontier model and a successor to Llama, codenamed Avocado, with plans for its debut in the first half of the year, according to CNBC. A substantial data center expansion underpins these AI advancements, paralleling efforts by competitors such as OpenAI and Alphabet. On Tuesday, Meta announced a significant partnership with Corning, committing up to $6 billion by 2030 for fiber-optic cables to support its AI data centers. Despite concerns from investors regarding the high costs associated with these AI investments, CEO Mark Zuckerberg has emphasized their necessity in light of the rapid development within the AI sector. "Making a significantly larger investment here is likely to be profitable over time," Zuckerberg stated during an October analyst call. Meta's capital expenditures linked to its data center initiatives are anticipated to reach $21.97 billion for the quarter. The company is also projected to report $56.98 billion in online advertising revenue for the fourth quarter, as per StreetAccount. Additionally, Wall Street estimates that Meta will have 3.58 billion daily active users during this period. Investors will also be closely watching Zuckerberg’s comments regarding the Reality Labs division, which focuses on virtual reality, augmented reality, and wearable technology aimed at enhancing the metaverse experience. Recently, Meta laid off over 1,000 employees from Reality Labs, shifting resources towards AI and related devices, such as the Ray-Ban Meta smart glasses. While Meta's tech chief Andrew Bosworth reassured that the company is not abandoning its VR ambitions, the substantial influence of Meta in this domain has raised concerns among developers, leading to fears of a potential downturn in the VR market. Analysts predict that Reality Labs will report an operating loss of $5.67 billion on $940.8 million in sales for the fourth quarter, accumulating over $70 billion in losses since late 2020.